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GE reshapes Alstom offer to appease France
General Electric revised its bid for the power arm of Alstom on Thursday, offering alliances in energy and rail to appease the French government and beat a rival proposal by Siemens and Mitsubishi Heavy Industries.
It was the latest shot in a two-month fight for control of Alstom’s energy business that has seen the Socialist government give itself powers to block any deal in the name of protecting local jobs and influence over a strategic sector.
GE’s new offer would see the U.S. conglomerate fork up less cash as it would sell its rail signalling unit to Alstom and set up 50/50 joint ventures in grid, nuclear and renewable assets. However, GE would still end up with the lucrative gas turbines that account for roughly a third of Alstom’s power business.
Alstom’s board is due to decide by Monday to pick a suitor. MHI-Siemens have said their offer valued Alstom’s power arm at 14.2 billion euros ($19.3 billion) - above GE’s 12.4 billion euros.
French trade unions who met French Economy Minister Arnaud Montebourg over the deal said MHI-Siemens was also adjusting its offer and putting extra money on the table to buy bigger stakes in parts of Alstom’s businesses. A spokesman for MHI in France however said no decision had been taken and a Siemens spokesman declined comment.
President Francois Hollande summoned key ministers including Montebourg on Thursday evening to examine the rival proposals, but the meeting ended with no statement of preference, only more talks scheduled for Friday morning.
Hollande will hold successive meetings on Friday afternoon with the heads of GE, Siemens and MHI, an official in the president’s office said.
“From what I know of General Electric’s offer, it is substantially better than its previous one,” French Finance Minister Michel Sapin told reporters on the sidelines of a meeting of European finance ministers in Luxembourg.
“You see, the government was right to intervene,” he said.
The government last month gave itself the power to veto a deal on the grounds it does not want Alstom, a big employer and one-time industrial champion, to sell the bulk of its business to a foreign firm without the state having a say.
But several union representatives of Alstom and political sources told Reuters that the Alstom saga had drawn a divide between Montebourg, said to favour the MHI-Siemens plan, and Hollande, said to favour GE.
“There are really two lines: Hollande and (Prime Minister Manuel Valls) who want to find the best solution and Montebourg who absolutely wants it to be Siemens,” said one source familiar with the situation.
Under its original all-cash offer, GE was simply due to take over Alstom’s entire energy business, which accounts for around 70 percent of group revenue, reducing the group to its smaller rail arm, known for making France’s high-speed TGV trains.
But the plan was swiftly rejected by the government, which called for more balanced “alliances.” It feared a straight sale of Alstom’s power arm would undermine France’s position in the energy sector while leaving Alstom vulnerable as a standalone rail player.
GE Chief Executive Jeff Immelt told reporters in Paris on Thursday that the talks with the French government had been constructive, that Alstom management had agreed to the new structure of the deal and that he believed members of the Alstom board “feel like this is a good combination of certainty and value.”
Immelt met Montebourg and Alstom labour representatives earlier on Thursday. He said the overall valuation for Alstom power assets remained unchanged in the new offer, but the cash component would drop to reflect the fact it was buying fewer assets outright. He did not give a figure.
The new GE offer now resembles the rival MHI-Siemens plan, under which Siemens would buy Alstom’s gas turbines and MHI would take minority stakes in three of its other power businesses.
Jean-Yves Hemery, head of the metallurgy arm of the CFE-CGC trade union, said MHI was now ready to put a further 800 million euros on the table to buy 40 percent of Alstom’s grid and hydro assets instead of 20 percent, while Siemens would offer to create a joint venture with Alstom in rail signalling.
Siemens mentioned no such plan in an earlier statement arguing its existing offer was better than GE’s.
“The counter offer of GE reinforces the credibility of the joint MHI/Siemens concept. It actually follows our approach - but doesn’t change the game. Our concept is still superior,” Siemens France CEO Christophe de Maistre said.
Alstom CEO Patrick Kron, who was present at GE France’s offices in Paris as GE briefed journalists, declined to make any comment to Reuters on the new GE offer.
Alstom’s 29-percent shareholder Bouygues also declined to comment on the offer, which is likely to return less cash in the form of an exceptional dividend.
The nuclear alliance proposed by GE would see the government hold a preferred share, giving it a veto and other rights over issues related to security and technology of nuclear plants - a vital point in France, which relies heavily on nuclear energy.
Sensitive intellectual property related to Alstom’s Arabelle nuclear steam turbine technology would also be transferred to a special purpose vehicle wholly owned by the French government.
Alstom shares extended losses after the announcement and closed down 6 percent. One trader cited the state’s veto right on nuclear issues as having spooked some investors.
GE said it had also signed a memorandum of understanding with Alstom’s management to boost the group’s rail activities.
Under the plan, GE would sell its signalling business to Alstom and enter collaboration pacts for services, technology, manufacturing and support in the United States.
Several Alstom union officials said the signalling deal as well as GE’s detailed commitments on jobs had appeased some of their concerns, but they noted that both offers on the table were now rather complex and could be difficult to manage.
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